Offering employees the right blend of equitable pay and attractive benefits has always been a key to retaining staff, and ultimately critical to long-term organizational success. But in this current full-employment environment, with joblessness recently dropping to its lowest level since December 1969, creating a strategy that presents employees with a package of appealing pay and benefits has never been more essential.
Linking pay to performance
For years, linking pay with performance has been debated by human resources experts. A recent study found 74 percent of employers offer some type of variable pay. Of these, 64 percent provided individual bonuses, and 25 percent bestowed team bonuses.
Naysayers argue pay-for-performance programs can lead to poor teamwork, spur a greater focus on quantity than quality, and are plagued by problems in performance measurement. But most team leaders remain convinced pay and performance should be tied. They point to several best practices. These include ensuring incentive budgets are matched to sales or productivity growth, creatively structuring base and variable pay, and keeping bonuses for past results separate from incentives linked to future sales or productivity benchmarks.
Among those arguing today's full-employment economy demands employers align performance and pay is Leaders Bank customer Janice Y. Burnham, CEO of ROC Group. Chicago-based ROC Group is a human resources firm focused on conveying the nuances of employment value, HR programs and change management.
"I see so many industries operating with thinner margins than ever," Burnham says. "So it's incumbent upon companies to make sure pay and performance are linked. What's in it for employers is clarity in what drives the economic engine for that business. When they're linking pay and performance, they become very knowledgeable about how best to run their businesses.
“What's in it for the employees is the answer to the age-old question of, 'What do I need to do to get a raise?' Linking pay and performance clearly says, ‘the more meaningful your contribution, the more you can be paid.’ That's emotionally satisfying, and it helps employees know what they need to do. If they don't know, they're not satisfied and not effective contributors to the business."
Trends in benefits
Of course, benefits are as big and often bigger a contributor to talent attraction and retention as pay. Popular benefits include paid leave, flexible schedules, allowances to care for aging parents and health care related perks like health savings accounts.
Among major trends in benefits strategy is aligning it with Employee Value Proposition (EVP), Burnham says. EVP calls for companies to get "very intentional" about why they are great places to work and what they can bring to employees' lives and career development. Employers are urged to become, she says, "More conscious, intentional and vocal about what used to be called the employer-employee contract.
"If you know what you're doing and why, and employees know why they're there, you wind up with the type of employees you want. You create an affinity with the organization."
Today’s youngest workers currently have the luxury of focusing on how their jobs align with their values, Burnham says. As they grow older, their focus will shift to health care and work-life balance. "But at the same time, I don't think you'll see them turn away from the drivers of their 20s," Burnham says. "I think this generation will continue to have an eye out for how a company's values align with their own."
She sees employees seeking perks from employers that include providing ways for them to advance their careers, as well as help in navigating student debt.
"One of our clients is among the first to recognize that, while employees are paying off student debt, they should still be able to build toward retirement and get a company 401(k) match, even if they themselves can't contribute," Burnham says. "The company will still make a match. The forefront of benefits is in finding ways like that to help employees deal with their student debt."
Employers are also helping staff navigate toward financial as well as physical wellness. "Employers are really shifting to encompass a broader definition" of well-being, she says. "And Millennials are going to be more engaged because of it. They're very interested in their financial well-being."
One thing's for sure. Employees look to their pay and benefits as a means of gauging employers' interest in them. "They want to feel valued at every level," Burnham says.